IBKR Interest Rate above Trinity Study

Hey fellow forum members,

I’ve stumbled upon an interesting financial conundrum and I’d really appreciate your insights on this matter. Currently, Interactive Brokers (IBKR) is offering an attractive interest rate of 4.83%, which is notably above the 4% suggested withdrawal rate famously discussed in the Trinity Study. This got me thinking - would it be wise to switch my investments to IBKR’s offering, considering its higher return, or should I still keep an eye on the stock market’s potential upside?

Here’s where my dilemma lies: On one hand, the 4.83% interest rate seems like a fantastic deal, exceeding the widely recommended 4% withdrawal rate. This suggests that, theoretically, I could live off the interest without touching the principal, leading to potential sustainability as long the interest rate is above the 4%. However, I’m concerned about missing out on the stock market’s growth potential. Historically, stocks have shown substantial growth over the long term, and by moving entirely to the IBKR interest rate, I’d potentially be foregoing those opportunities.

But there’s another factor that needs to be taken into account - inflation and currency depreciation. Since the interest rate is in USD and I’m assuming you’re talking about the potential depreciation of USD against CHF (Swiss Franc), this adds another layer of complexity. If the value of the USD diminishes relative to the CHF due to inflation or other factors, it could erode the real value of the interest earned.

What are your thoughts on this situation? Have any of you faced a similar decision? Your insights and experiences would be greatly appreciated! Let’s discuss and learn together.

Created with the kind help of my colleague ChatGPD

Unless your spending is largely in USD, forget the idea.


On top of the (pretty big) currency problem:

  1. 4.83% is the current interest rate (on USD) at IBKR. It will fluctuate with time. If/when it goes below 4%, there is no guarantee that the stocks you’ve eschewed won’t be more expensive than they are today and/or that their long term prospects match the returns you’d have gotten by buying them now (it could be better or worse but buying them only at some points in time and not others sure messes up the chances to get the average long term expected returns we have for them, that comes with being consistent in holding them).

  2. The returns on USD cash at IBKR are not inflation adjusted, while the 4% safe withdrawal rate coming from the Trinity study is.


And this is the key point. Real, inflation adjusted USD rates on short term deposits should be around +2% now, but last year for example it went down to almost -10%.

Interests on cash deposits is a sweet coating that should hide the bitter fact that cash is constantly losing value long term.

I don’t remember where I have seen it, but somewhere there was a statement that as an investor, you are competing not against other investors, but against inflation.


Also taxes, 4.83% x 0.7 = 3.4%


You pay taxes on interest rates at 30% tax rate? wow!

Interest is income, so it’s taxed at your marginal tax rate.

This can be higher than 30%, depdending on where you pay taxes and your total income :frowning:


Marginal rate close to 45%. Welcome to Geneva

Average tax rate is lower

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Countersrguing myself :joy:

US bonds and T-bills offer even higher rates of interest with longer maturities. Of course, you still have the currency risk.


…and your point is?

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My point is, if you invest in US securities you will be exposed to FX rates whether you like it or not. Why not take advantage or at least hedge against it?
Sure…Fx trading is ridiculously difficult, like anything I ever encountered, but it can be done.